IBM Is Not Counting on G7 recovery this year

May 23, 2008
International Business Machines Corp is not counting on recovery in established G7 markets for growth this year.

The computer giant is looking instead to emerging markets like India and China, Chief Financial Officer Mark Loughridge told Reuters.

Speaking at the Global Technology, Media and Telecoms Summit, Loughridge said, "If I were in a business model where I needed double-digit growth out of the G7 to drive my performance, I would be in a cold sweat,"

He added, "We're not counting on a resurgence or recovery to achieve our growth for the year," referring to established markets in the G7 countries -- the United States, Japan, Canada, Italy, Germany, France and United Kingdom. "But we are counting on the high-growth markets to continue to grow," he said, noting that the company enjoyed more than 10% growth in 50 countries last year. These markets include Argentina, Australia, South Africa, Poland, Spain and Russia.

Loughridge said IBM has gauged its investment and expectations "more conservatively in all the established G7-like markets" amid worries about slower growth and credit concerns in the US.
Loughridge downplayed concerns that any slowdown in the developed economies could spread to emerging markets. "I personally see less linkage, dependency, between the established markets and the high growth markets," he said.

IBM is optimistic it can fulfill its 2010 profit goal, as a focus on emerging markets helps insulate the computer services provider from the US credit crunch. "I think we are on track. I think we are well on track," Loughridge said. "I'm not going to reintroduce a forecast today, but if you look at the performance, we have had some pretty encouraging signs."

In May 2007, IBM laid out its 2010 Earnings Per Share Roadmap, which called for 12% to 15% compound annual growth based on five objectives. It expects to maintain historic rates of revenue growth in single digits but expand profit margins using share buybacks. IBM is also investing in growth in emerging markets and software acquisitions, and expects savings on pension plans.

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